Performance Metrics
What is IRR (Internal Rate of Return)?
IRR (internal rate of return) is the annualized, time-weighted rate of return of a fund’s cash flows. It accounts for the timing of capital calls and distributions, not just the total multiple.
IRR is the discount rate at which a fund’s net cash flows sum to zero — in practice, its annualized return. Because it weights timing, returning capital sooner produces a higher IRR than the same multiple returned later.
IRR is the standard headline performance figure for private funds, but it can be distorted by early distributions or subscription-line financing, so LPs read it alongside multiples like MOIC and DPI.
Also known as: internal rate of return